Debt and credit, Finance

Don't lose the credit score that you've worked for - Can frugal living help?

debt-sttlementIt is a truth universally acknowledged that if you want to access credit, whether through credit cards or loans, you have to prove to the lenders that you will be able to pay back the entire amount that you borrow. But in order to get the credit that you deserve, you have to do more than just act responsibly. You have to make sure that your activities are recorded in the right manner in the credit reporting system. There are multiple benefits of having a good credit score like enjoying low rates on cards, personal loans, grabbing an insurance policy within your means and even grabbing a good job. If you've already incurred debts, you can opt for credit counseling or debt settlement online programs in order to help maintain a good credit score.

Frugal living can also lead to a disciplined lifestyle due to which you can get back a firm grip on your finances and thereby manage your credit score. If you can lead a frugal life, giving utmost importance to the necessities than the luxuries, you can easily avoid falling in debt. The more you can avoid debt, the more you can protect your credit score and thereby remain creditworthy among the lenders. Check out some worthy tips to follow in order to maintain a good credit score.

  • Pay on time and every time: On-time payments, not just for your credit card accounts but also for all your bills are the foundation of a good credit history. You should make sure you pay on time and also double-check the due date every month when the billing statement arrives, so that you don't become late on the monthly bill payments. Consider paying online to avoid any kind of delays in the mail and you should then sign up for the alerts so that you keep receiving alerts.
  • Know what goes into making your credit score: The more you know about what constitutes your credit score, the easier it will be to maintain a good credit score. The key pieces of information that are used to calculate your credit score are your payment history, credit age, mix of credit, level of debt and recent credit types that you've taken out. However, not everything financial affects your credit score.
  • Don't close your old credit cards: When you close a single credit card, your credit card issuer stops sending any kind of updates to the credit reporting agencies and the credit scoring formula places less weight for the inactive accounts that are no longer being used. After 10 years, the credit bureaus will remove the closed accounts from your credit report and if the account is an old one, losing the credit history will shorten your average credit age and this will cause your credit score to drop down.
  • Manage all your debts: The credit cards aren't the only accounts that influence your credit score and the loan balances and the new lines of credit also impact the level of debt that you take out. Having too much debt can take a toll on your credit score points and therefore you have to manage your debt in the best way possible. The lower is your debt level; the higher will be the credit score. By leading a frugal life, you can avoid incurring debt.
  • Limit the application of new credit: Each time you apply for credit, your credit score will take a small hit. Credit inquiries are only 10% of your credit score but when you have a high credit score, you tend to lose a huge amount points. By opening a new credit account, you lower your average credit age and therefore you need to use credit sparingly.

Therefore, when you're desperately looking for ways to bump up your credit score, you should try following the above mentioned steps. Take the required steps to stay creditworthy among the lenders.

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